NAMIC: House Flood Insurance Bill a Step in the Wrong Direction

Legislation set to be voted on by the U.S. House of Representatives would roll back vital reforms to the National Flood Insurance Program and ask flood insurance policyholders from across the country to subsidize coverage for those in high risk areas, the National Association of Mutual Insurance Companies said today.

"The legislation put forth in the House appears to continue moving back the reforms adopted as part of the Biggert-Waters Act in 2012. Those reforms, which passed with overwhelming bipartisan majorities, were designed to strengthen the National Flood Insurance Program and ensure it would be there for its millions of policyholders,” said Jimi Grande, senior vice president of federal and political affairs for NAMIC. “These efforts to roll back Biggert-Waters may provide a short-term political benefit, but we continue to believe they will be a mistake for homeowners, NFIP policyholders, and taxpayers as the program sees it finances further decline."

The bill largely undoes major reforms passed with overwhelming bipartisan support in 2012 to shore up the NFIP’s finances by moving rates toward levels that reflect the actual risk of flooding facing a property. Instead, the House bill keeps rates for many in high-risk areas artificially low, and pays for the loss by adding a fee to every flood insurance policy sold through the program.

“Under the House bill, those with subsidized rates lose any incentive to mitigate against flood damage,” Grande said. “Flood insurance coverage would also become needlessly more expensive for every consumer and, until the program's reserves reach adequate levels, the taxpayer will still be on the hook to make sure the NFIP can pay claims after major storms.”

NAMIC had called on lawmakers to take a more targeted approach to affordability problems that have arisen since the enactment of the 2012 reforms, through direct aid provided on a means-tested basis, slower phase-ins for risk-based rates, and low interest loans to reduce flood risk.

“By addressing specific cases of true hardship, lawmakers could have resolved the problems facing homeowners without sacrificing the NFIP’s fiscal stability or putting the onus on others,” Grande said. In addition, he noted that by keeping flood insurance rates artificially low, Congress would ensure that the government would remain the sole significant provider of flood insurance.

“Unlike the government, a private insurance company has to charge adequate rates to stay in business,” he said. “No insurance company can compete with the low rates being offered by Congress or ask their other policyholders to make up the loss. Many in Congress have suggested that the government shouldn’t even be in the business of flood insurance, but a vote for the House bill is a vote to keep the government involved permanently.”